Blockchain Papers

Eleanore Hickman, Eilís Ferran

No abstract is available for this record.

Pavel Pimenov, Victor Dostov, Pavel Shoust

No abstract is available for this record.

Brian Sanya Mondoh, Sara M. Johnson, Matthew Green, Aris Georgopoulos

No abstract is available for this record.

Ilesh Dattani Assentian, Nuria Ituarte Aranda

Abstract Financial regulation has changed significantly in the 10 years since the global financial crisis. Tougher, more detailed and more complex standards now apply to all aspects of regulation. In more recent times that regulation has been increasingly influenced by the widespread deployment of fintech introducing new services and applications whilst transforming how consumers interact with the more traditional existing banking services. This chapter introduces the context and focus of this most recent regulatory and supervisory authorities and highlights some of the key regulatory initiatives, existing and ongoing, designed to manage the key risks posed by the disruptive nature of the rapid digital transformation occurring in the sector. Technologies designed to sup-port aspects of these regulations are highlighted as part of practical guidance to support innovators in the sector and for those in the sector considering developing or deploying the increasing plethora of new applications utilizing emerging technologies like AI or distributed ledger technologies.

Cong Jiang

No abstract is available for this record.

Daniela Petermair

No abstract is available for this record.

Silviu OJOG

Decentralized finance (DeFi) is the term used to describe financial applications and services built on blockchain, the technology behind cryptocurrencies. DeFi uses blockchain as a trust mechanism, enabling unknown parties to transact with each other, removing unnecessary intermediaries, and lowering transaction costs. In order to seize the potential of blockchain technology in this particular industry and how it can be translated into other niches, it is necessary to understand its mechanics, implications, and particularities. This paper aims to present the operating principles, technologies, and security implications related to blockchain-based decentralized finance.

Adrienne Héritier

Abstract This chapter builds on recent work in a project funded by the Swedish Research Council on the evolution of regulatory structures in EU financial governance, which provides a comprehensive framework to investigate the dynamics leading to centralization, decentralization, and fragmentation in EU financial regulation. This generalizable theoretical account of regulatory centralization and its counterforces has been subject to an empirical assessment on the basis of major EU legislative packages in financial regulation, including the Markets in Financial Instruments Directive II (MiFID II) and capital markets union. This chapter further builds on the subsequent work, asking who benefits from the regulatory measures analysed, and how are decision-makers and stakeholders held politically and administratively accountable. The chapter focuses on all actors involved in the regulatory process: politicians and regulators, as well as market players such as investors, fund managers, and investment firms, and outlines the modes in which they are linked through various political and administrative accountability mechanisms. Its analysis of accountability channels is related to policy contents by asking whether specific regulatory objectives and results give rise to the mobilizing of available accountability channels, and whether the use of accountability channels helps improve regulatory decisions.

Rüdiger Veil

Abstract This chapter analyses new regulatory challenges posed by new forms of the digitization of financial instruments, on the basis of blockchain and distributed ledger technology (DLT). While real-world examples for the problems posed by these new technologies continue to be rare, the chapter discusses the various forms for the digitization of financial instruments and transactions currently available. Against this backdrop, it illustrates the difficulties to adequately address the new phenomena within the existing regulatory frameworks. In many jurisdictions, traditional concepts of securities law do not (yet) provide for digitized instruments, while European financial markets regulation, depending on the design of individual trading platforms and transactions, already facilitates the establishment of new platforms trading in such instruments. However, the decentralized nature of blockchain-based financial instruments and trading transactions clearly comes with substantial challenges for residual regulatory strategies, which rely on the regulation of market operators as guardians for the preservation of market stability and investor protection. Similar problems are identified with regard to the providers of securities settlement systems.

Jorge Luis Baca de las Casas

By 2021 a structural disconnect existed between two large pools of capital: real estate owners holding significant value in physical property but constrained by the high cost of capital and the bureaucratic and legal burdens of accessing bank credit lines, and crypto investors holding liquid capital but lacking real-world collateral against which to deploy it productively within the emerging decentralized finance (DeFi) ecosystem. This whitepaper describes the Bitestate architecture, designed to bridge that gap. Real estate is transferred to a local trust managed by a registered trustee bank that secures legal enforceability and ensures KYC and AML compliance; the underlying "Rights of Disposal" are then tokenized as non-fungible tokens (NFTs) and used as collateral against revolving asset-backed credit lines provided by crypto lender pools; in the event of default, smart contracts trigger a notification flow that instructs the trustee bank to liquidate the compromised asset and repay the lender. The architecture targets real estate portfolios across Latin America — Peru, Mexico, Colombia, Brazil and Chile — with the investment vehicle anchored in a European regulatory regime contemplating the Tokens and Trustworthy Service Providers Act (TVTG) and its Ordinance (TVTV), commonly referred to as a "Blockchain Act" (the specific jurisdiction was left as an open placeholder in the 2021 draft). The contribution of the document is a concrete, legally structured architecture for integrating real-world real estate as collateral in the DeFi ecosystem.

Niko Soininen, Kaisa Huhta

Decentralization describes a process in which there is a shift from a centrally planned, financed and operated energy system to a more diffuse model where these activities are shared between an increasing number of parties. It accordingly plays a key role in democratizing the energy sector and can also contribute to various other goals. For example, decentralization coupled with increased use of renewable energy sources can improve the sustainability of energy systems. However, it also increases their complexity and the likelihood of surprising, unwanted dynamics within them as more consumers operate as producers, financiers and operators in that sphere. Consequently, energy systems become more unpredictable as central producers, distributors and state institutions have less control over the dynamics of the system as a whole. Against this background, this chapter analyses decentralized electricity systems through the lens of complexity theory, which is an interdisciplinary field of research that addresses complex systems in which large networks of components and/or agents collectively produce emergent, surprising dynamics. The chapter uses complexity theory to explain decentralized electricity systems as complex systems and to evaluate – using the EU as a case study – whether the EU Clean Energy for All Europeans legislative package adequately addresses the issues that emerge in regulating such a complex system.

Pierre Schammo

For enthusiasts, distributed ledger technology (DLT) and smart contract technology (SCT) promise a future of frictionless interactions and decentralisation. In practice, however, it is widely acknowledged that this vision faces significant challenges. These include legal challenges, technological challenges, but also implementation challenges. The latter arise because delivering the DLT/SCT vision does not take place in a vacuum, but in a setting populated by existing market actors that operate on the basis of pre-existing technologies and absent an industry-wide layer of standards to support technological change and the vision of frictionless interactions. This article seeks to contribute to the literature interested in implementation challenges. Its aim is two-fold: to examine implementation challenges and to take stock of current market efforts to overcome them. In particular, this article focusses on the efforts of the International Swaps and Derivatives Association (ISDA) and its initiatives to ‘standardise to digitise’. It will show that these initiatives can usefully be examined as an attempt to help the industry coordinate on a common foundational standards layer. However, this article also finds that the success of ISDA’s efforts is by no means certain. Nor are its efforts without raising some concerns.

Lauren Fahy, Scott Douglas, Judith van Erp

Invented in 2008 with Bitcoin, cryptocurrencies represent a radical technological innovation in finance and banking; one which threatened to disrupt the existing regulatory regimes governing those sectors. This article examines, from a reputation management perspective, how regulatory agencies framed their response. Through a content analysis, we compare communications from financial conduct regulators in the UK, US, and Australia. Despite the risks, challenges, and uncertainties involved in cryptocurrency supervision, we find regulators treat the technology as an opportunity to bolster their reputation in the immediate wake of the Global Financial Crisis. Regulators frame their response to cryptocurrencies in ways which reinforce the agency’s ingenuity and societal importance. We discuss differences in framing between agencies, illustrating how historical, political, and legal differences between regulators can shape their responses to radical innovations.

Andrej Ilievski

The aim of the paper is to examine the impact of fintechon central banks and policy objectives, butalso, the role of central banks in enabling fintech in fulfilling its promises. Namely, for the financial sector fintech promises shorter, speedier transactions; greater capital efficiency; and stronger operational elasticity. For consumers, fintech promises opportunities, both in form of new products and services but also in improving the existing one at lower costs. In general, fintech promises a more inclusive financial system, with people better connected, more informed and increasingly empowered. In order to support the development of fintech central banks should consider many aspects like: exploring the use of distributed ledger technology (DLT), partnering with fintech companies and calibrating its regulatory approach to fintech developments.

Sebastian Grund

Abstract The European sovereign debt crisis and, more recently, the COVID-19 pandemic have revealed the European Economic and Monetary Union’s fragility, which essentially emanates from the inherent tension between a single monetary policy and decentralized fiscal policies. To cushion economic and financial shocks and sever the sovereign-bank doom loop, different proposals to create a common public debt security have been put forward, although none of them has so far seen the light of day. Building on pertinent economic and finance scholarship, this article reviews four promising safe asset proposals from a legal perspective: Sovereign bond-backed securities (SBBS), E-bonds, Purple bonds, and Coronabonds. Rather than focusing on their feasibility under EU law or national constitutional law, this article compares the proposals from an investor perspective against the backdrop of the following formal and functional legal characteristics that render assets ‘safe’: governing law, dispute settlement forum, investor protection, and investor representation in sovereign debt restructurings. Against this backdrop, targeted recommendations on critical design elements of safe assets, with the aim of reconciling the economic policy objectives with the pertinent legal constraints, are advanced.

Daniel Gozman, Jonathan Liebenau, Tomaso Aste

This article explores the potential for applying blockchain technology for regulatory compliance and for reducing compliance costs and easing regulatory burdens. We describe the development of the Project Maison proof-of-concept blockchain system for regulatory reporting of mortgages in the U.K. This case study identified use cases and also the risks of increased supervision and loss of control and the governance challenges and trade-offs inherent in applying a decentralized approach to regulatory reporting.

Renato Mangano

The market for cryptocurrencies is interspersed with cases of loss, theft and fraud and a new transnational practice in bankruptcy law is emerging whereby cryptocurrency exchanges compensate the injured users on a collective basis. This paper will argue: first, that this trend has transplanted into Asia and Europe the US idea according to which bankruptcy law can be employed to avoid mass litigation; secondly, that this trend has transcended the debate about the characterization of digital assets, including the concerns of those scholars who maintain that digital coins cannot be objects of property; and thirdly that – since this practice follows the pattern of so-called restorative justice and since cryptocurrencies are highly volatile – injured users, as creditors of the exchanges, ought to be satisfied in kind, i.e. incryptocurrencies themselves.

Evariest Callens

No abstract is available for this record.

Witold Srokosz, Paweł Lenio, Grzegorz Sobiecki

The main goal set in this monograph was to create an economic and legal model for financing long-term and capital-intensive investment projects utilizing the potential of DLT (Distributed Ledger Technology) so that the new solution is an effective alternative and is adapted to existing legal possibilities (compliance-by-design approach). The monograph is the most important result of the work carried out as part of a grant financed by the Polish National Science Centre, and contains a proposal for such a model (see Chapter 7 ).

Colin Bamford

Abstract The chapter examines the process of payment, both as a description of the way in which a monetary obligation is discharged, and as a process by which money is transmitted from one person to another. In the former case, the chapter describes the operation of set-off, netting, consolidation of accounts and the operation of running accounts. In the latter case, it deals with the mechanisms for payment in the UK, internationally and at the level of the EU through the TARGET2 system, focusing in each case on the process of clearing through the central bank of the currency concerned. It also discusses Distributed Ledger Technology (DLT) and its use in payment and clearing systems.

Alexander Dill

The book’s concluding chapter discusses the challenges to banks’ roles in credit intermediation and payment services posed by FinTech, particularly distributed ledger technology. It argues that although FinTech presents significant risks, it will ultimately not displace banks in these core economic roles. The chapter also highlights the future role of RegTech in enabling banks to establish an effective aggregate risk data and reporting infrastructure that will enable their regulators to simultaneously monitor the potential buildup of risk in individual banks and the financial system as a whole. The chapter ends with the argument that bank regulation is highly path dependent due to the international standard-setting authority of the BCBS and the homogenizing effect of the integrated financial markets. Barring another crisis, the basic structure of financial regulation is not likely to fundamentally change.

Ori Oren

In the summer of 2017, a new method of funding startup businesses exploded from a small capital market to one worth billions. “Initial Coin Offerings” (“ICOs”) can appear to be a simple crowdfunding campaign or a public stock offering at the same time and, until recently, have been conducted with no regulatory oversight. Due to the high risk of fraud, the SEC has begun cracking down on ICOs, requiring many issuers to register their “ICO tokens” as securities or halt trading entirely. This Note looks at the regulatory precedents and factors that the SEC has considered to decide whether a token is a security, and proposes an alternative legal system to securities law that may be better suited for regulating certain types of ICO tokens. This Note concludes that, for ICOs that raise money for a decentralized autonomous organization—in which all token purchasers hold equal management rights—uniform partnership law is the ideal mode of regulation.

Alfred Ruoxi Zhang, Anujan Raveenthiran, Justin Mukai, Ramisha Naeem · 7 authors

Compared to initial public offerings (IPOs) that are sales of company ownerships, and loans that are sales of debt claims, initial coin offerings (ICOs) are sales of promises of cryptocurrency appreciation. However, regulatory uncertainties continue to prohibit successful widespread adoption. This paper examines ICOs with varying levels of success, including Mastercoin (now Omni) and Kin, as well as fraudulent ICOs, like REcoin and OneCoin. The discussion of the benefits and flaws within the ICO market examines regulatory challenges concerning risks transferred to investors through information asymmetry, while questioning the ability of regulations to enhance investor protection mechanisms without undermining the fundamental value of cryptocurrencies and ICOs as a viable funding structure.

C. Daniel Lockaby

This Note recommends a viable way for the Securities and Exchange Commission (SEC) to apply the Regulation S foreign-issuer safe harbor to Initial Coin Offerings (ICOs). In the last two years, cryptocurrencies and blockchain-based companies have witnessed dramatic rises in price and value. New entrants to the crypto-markets often use ICOs as virtual public offerings to earn capital and develop their projects. The SEC has signaled that they plan to fold ICOs and blockchain offerings into existing securities law. How these new virtual capital-raising mechanisms will fit into this framework is still largely unknown. As a defensive measure, many ICOs have banned US investors in an attempt to become foreign offerings that are outside the SEC's reach. Regulation S is the existing safe harbor that conventional securities offerings utilize to ensure that they are "foreign offerings." While ICOs are novel and do not fit perfectly into Regulation S's language, the safe harbor can be adapted to appropriately set parameters for ICOs. This Note suggests the correct interpretation that both protects US consumers and sets acceptable requirements for corporations seeking to fall within Regulation S.